“Run for your life!” - Former Fed Chairman predicted a stock market crash

How to protect capital from depreciation in the stock market? How do investors diversify risks from stock market crashes?

Since the beginning of 2018, the Fed interest rate has increased five times. In January it was 1.5%, and after another decision was made on December 19 to increase its size by 0.25%, this figure reached 2.5%. The rate increase is intended to support the US dollar and save the overheated economy. 

At the beginning of the year, former Federal Reserve Chairman Alan Greenspan, who was the head of the US Federal Reserve System for 18 years, in his interview with Bloomberg, spoke about the critical situation of the securities market. He was concerned about the rising national debt and budget deficit. 

There are two bubbles - one in the stock market, the other in the bond market. I think the bond market bubble will become critical. US government bond yields are hovering near historical lows. 

In a recent interview with CNN, Allen Greenspan urged investors around the world to “prepare for the worst.” His fears of a stock market crash are confirmed. For the first time since 2008, all stock indices may end the year in the red. The weekly time frame shows the negative dynamics of the Dow Jones Index (DJI) and the S&P500 Index (SPX)

Recall that against the backdrop of the trade war with China, gradually increasing inflation and rising unemployment, the stock market is showing a decline in December index indicators are below the level that was at the beginning of this year. Sales in the stock market led to a loss of capitalization of approximately 4.5 trillion. US dollars. 

The longest bull run in the US stock market since 1960 has come to an end, and a possible rebound should be seen as the last opportunity to escape. I will be very surprised if the market stabilizes here and then takes off like it has in the past. 

The author of the economic bestseller “The Black Swan”, Nicholas Taleb, an American mathematician and trader of Lebanese origin, spoke negatively about the activities of Alain Greenspin as head of the Fed and placed full responsibility for the 2008 crisis on his regulatory methods.. 

In his book, Nicholas Taleb predicted the financial crisis of 2008 and spoke about the impact of globalization and individual random events on the development of the world economy. In subsequent publications, he also argues that the economy is currently on the verge of a new economic crisis.

How to save your capital and where should investors flee from a shaken stock market?

Previously, it was possible to use commodity markets, but the cost of raw materials has also recently shown negative dynamics. We believe that part of the funds that are now being withdrawn from the securities market can be directed to the cryptocurrency market, which now has a rather attractive asset value, due to the bearish trend that continues throughout the year. 

The past week just demonstrates an increase in the capitalization of the crypto market, which may be caused by the transfer of a small part of capital investments from the stock market. Institutional investors are held back from large cash injections by the lack of clear government regulations. However, the hope for approval of Bakkt in January 2019 will open up new prospects for financial funds and large private investors.